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BAT stake in Zurich merger cut to 43pc

BAT Industries' shareholders' stake in the proposed Zurich insurance
merger has been reduced by pounds 500m following detailed negotiation of the deal. BAT
announced in October that its insurance interests - Eagle Star, Allied Dunbar and Farmers
in America - would be taken over by the Swiss company with BAT receiving 45pc of the
shares, which would be distributed to the British company's own shareholders, leaving BAT
a purely tobacco company.

When the negotiations ended and the deal was signed on Monday, however, the BAT stake
had been cut to 43pc, increasing Zurich investors' stake from 55
to 57pc. Negotiators said the change reflects Zurich' s
better-than-previously-anticipated earnings outlook, but it will give the Swiss
shareholders an extra pounds 500m and cut the British investors' stake by the same amount.

Rolf Huppi, the Zurich chairman who will run the expanded
company, said: "As a result of what I have seen in the past two months, I am even
more convinced that the combined operations will form an excellent platform for serious
growth in key markets."

Zurich is the larger company with pounds 14 billion of premium
income last year, pounds 157 billion of funds under management and 41,000 staff compared
with BAT's pounds 9.6 billion of premiums, pounds 48 billion of managed funds and 25,000
staff. Together the companies will be one of the world's largest insurance and fund
management companies with a market value, based on Zurich's price,
of pounds 24 billion.

The deal will be structured by creating a new parent company - Zurich Allied
- for the Swiss company, which will be listed in Switzerland and own 57pc of Zurich Financial Services, the group holding all the
insurance businesses.

A new British company called Allied Zurich, to be listed in
London, will own the rest of Zurich Financial and its shares will
be distributed free to holders of BAT - which will change its name to British American
Tobacco when the deal is completed in 1998.

The separate Swiss and British listings mean that both companies can be included in
their local share indices. Allied Zurich will join the FTSE 100.

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